Repossession of Real Property

Determine in separate parts the taxable gain on repossession of real property sold on the installment method and the basis of the repossessed property.

To open this calculator, click Calculators in the toolbar, and then click Business > Repossession of Real Property in the left panel.

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Special information

The rules for figuring these amounts depend on the kind of property the taxpayer repossesses. The rules for repossessions of personal property differ from those for real property. Special rules may apply if the taxpayer repossesses property that was their main home before the sale.

The repossession rules apply whether or not title to the property was ever transferred to the buyer. It does not matter how the taxpayer repossesses the property (whether the taxpayer forecloses or the buyer voluntarily surrenders the property). However, it is not repossession if the buyer puts the property up for sale and the taxpayer repurchases it.

For the repossession rules to apply, the repossession must at least partially discharge (satisfy) the buyer's installment obligation to the taxpayer. The discharged obligation must be secured by the property the taxpayer repossesses. This requirement is met if the property is auctioned off after foreclosure and the taxpayer applies the installment obligation to the bid price at the auction.

Note: The installment method used for the taxable gain uses the special rules of IRC Section 1038.

Internal notes


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